Government Operations Committee on Feb. 6th, 2007

[Vic Toews]

Thank you, Madame, for the questions. I'm going to let the Comptroller General answer that, by and large.

I do want to say that I certainly saw your recommendations, as a committee, along with the Auditor General's recommendations. I think there is much merit to them.

I was briefed extensively on that issue perhaps about a week ago, about the various types of accounting and the problems with each type. It appeared to me at first blush that the accrual system does provide for a truer reflection of the actual expenditures and the actual state of the government's books at any one time. No doubt, that's why the Auditor General has endorsed that system. All I can say is that I will move in a timely fashion.

Mr. St-Jean.

[Charles-Antoine St-Jean, Comptroller General of Canada, Treasury Board Secretariat]

Thank you, Mr. Chairman.

The response from the government is being developed, as we speak.

The answer is being prepared. If I'm not mistaken, the protocol requires that it be tabled within 45 to 90 days after the tabling of the report of the Public Accounts Committee, which would take us to the beginning of April. So, things are moving forward.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In any case, I hope that your government will accept it because you and your colleagues in Cabinet constantly use that word — accountability — at Question Period and all the time. I have used the word “imputabilité” in French but it should be “responsabilité”. I think it would be an excellent way to implement this concept of accountability in the management of the taxpayers' money.

About Bill C-11 — like you, I believe there is a link between Bills C-11 and C-12 — you've just said that you want it to be implemented as soon as possible. Your schedule for C-11 is very important because our public servants, our unions and our managers have been waiting for a long time, even if there was no unanimity. Instead of a referring to C-11, I should have referred to the Public Servants Disclosure Protection Act.

Do you have a detailed timetable for its implementation? Also, since you've talked about better management, have you made any serious projections at Treasury Board about the costs not only for central agencies but also for those who will have to implement this necessary Act without delay? That was my question about C-11 and I will have a few about the expenditure management system.

[Vic Toews]

Thank you.

The issue of Bill C-11, or the whistle-blower's legislation, I think is important. In speaking with my staff about that particular legislation, I understand there still has to be some consultation with stakeholders, including trade unions and management individuals. We are committed to moving that through as quickly as possible, but I don't want to unilaterally impose a program or a framework that the trade unions, for example, are not happy with. There needs to be that consultation, and I've discussed that particular issue with the secretary.

In terms of the cost, I can't say off the top of my head what that cost is, but perhaps the secretary can advise us.

[Wayne Wouters]

For the implementation of the Federal Accountability Act, the government, in the 2006 budget, set aside basically $60 million a year to bring in the various provisions of the act. Now that the act is passed, of course, those estimates are being refined, and individual departments will need to bring forward their detailed proposals to the Treasury Board Secretariat for approval.

It's within that overall envelope that PSHRMAC, the human resource agency responsible for this, will be bringing that proposal to the board, and they're finalizing their estimates now. So it's again part of the overall implementation.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Do I have any time left? Thank you, Chair.

In November 2006, when the Auditor General tabled her latest report, she also revealed her findings about the expenditure management system and we have had the pleasure of welcoming her several times since then. She said, among other things, that the expenditure management system has become less effective ever since we've had a budget surplus. Do you agree with her?

Mrs. Fraser added that each year the Treasury Board Secretariat updates the funding of existing programs without any systematic review. By the way, I want to thank the researchers of the Library of Parliament who have prepared the document I am using now. I am interested in this matter because I heard Mr. Wouters say that the government has estimated that the implementation of C-11 would cost 60 million dollars per year and that the departments are now making plans for this. Later on, when the budget is updated, will it be done on the basis of a systematic review? Can we expect that? That was my first question relating to the findings of Mrs. Fraser.

[Vic Toews]

Yes, I'm familiar with that. Thank you for that summary. It's a good summary for all committee members to hear.

The issue of expenditure management is one that I am particularly concerned about, not only because of my experience here in the Treasury Board but also as a result of my role in my previous department. My concern is that when we are initiating new programs, are we also looking at expenditures on programs that are no longer priorities, or that priorities have shifted? I was pleased to see that was one of the Auditor General's concerns as well.

As a result, we as a cabinet have undertaken to make rigorous examinations of all new spending proposals. We are not simply looking at the value of those new spending proposals and assessing the quality and cost-effectiveness of them. We are also taking explicit account of the funding, performance, and resource requirements of existing programs, so that as we're implementing new programs we're also taking a look at how money is being spent in existing programs.

I don't know if most Canadians realize this, but one of the points that was brought to my attention was that in six years, the A-base budget of the Government of Canada went from $45 billion to $90 billion. I thought, “That's a remarkable increase in only six years. Is there something we should be doing to make sure that as we're adding certain things to the A-base—essentially the portion of the budget that rolls over every year and is spent almost automatically—we are reviewing those existing programs?”

So the commitment of our government is to do that through the expenditure management review program, as commented on by the Auditor General,

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

On the same topic, minister, one may ask why there were, from 1990 until about 1994-1995, not just layoffs but job cuts and a loss of human resources. If I am not mistaken, some 15,000 positions were abolished, with all the corresponding costs for severance pay and so on. Today, however, there are more public servants than before the elimination of those 15,000 positions. One may wonder what became of those funds and activities and where was the added value. I believe my time is up but I will try to come back later on. Thank you, minister.

[The Chair, Liberal, Diane Marleau]

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Madam Chair, and welcome to all again.

I want to beat a dead horse: accrual accounting as mentioned by Madam Thibault. Of course, I was involved with the public accounts committee where we did the study, and here as well, and certainly I'm not an expert on accrual accounting, but I got my indoctrination or baptism by fire ad nauseam.

The difficulty that I and we and both the committee on public accounts and of course this committee have seen is that there has been a great deal of hesitation for a great many legitimate reasons. I can recall that both Mr. St-Jean and Mr. Maloney, who is sitting in the audience, had some very well-founded, serious concerns on behalf of Treasury Board that would pose some difficulties for implementation. They were well-received and definitely were part of the equation that we have wrestled with as well, so we recognize that it isn't just a total upside. There are problems and difficulties with the implementation process.

But that having been stated, both public accounts and now this committee unanimously have recommended in a very strong manner that we feel unequivocally that there should be an immediate adoption of that principle and an implementation process should begin ASAP.

So my concern with your response, and I'm encouraged, quite frankly, with a 45- to 90-day response potentially coming back--I think that's encouraging, and I would also ask the minister to remain vigilant and see if we can maintain that timeframe, because what we don't want to do is get into another year and another year. This has been going on for years, and there's no doubt that there has been a lack of efficiency or transparency simply due to an accounting system that isn't fully giving us the results we need, and accrual accounting was deemed to be a definite advantage.

With that preamble, I would encourage the minister to respect the will of these committees when they unanimously went forward with these actions and strongly urge the government to give us a quick response. We see we have one coming to public accounts. Should this be in isolation and/or a separate one to this particular committee? Can we act in tandem? What are your thoughts, Mr. St-Jean? Obviously, when we have two committees, we don't want to end up in conflict with ourselves on this issue. How do you see that we best receive this information?

[Vic Toews]

I'm going to let Mr. St-Jean answer that, but I do want to reiterate that it is clear that there are distinct advantages to the accrual basis, and I don't think there's going to be much of an argument on that, comparing it simply to the cash accounting or the near cash accounting that is done. Accrual does, in many ways, reflect the whole scope and the size of the organizations, the government's resources and their obligations, their costs. I think it does make more information available to decision-makers.

But I think the question you're asking--why haven't we done more, and when the actual report does come out, are we going to be coordinating it between two particular committees—

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Yes, but, Mr. Minister, I think the committees deserve a full explanation in a number of areas--in costing, as an example. To implement this process to either merge IT technology and/or to deal with the human resource deficiency that potentially could exist is going to present some problems or dilemmas for government.

Will there be recommendations coming from your department that will deal with these issues, or will we just have a report that says we have a problem and then we're going to have to delve into that at the committee level again, or are you going to be coming in with recommendations as to how to implement and the costing allowances that will be given to that?

[Vic Toews]

Well, I don't want to state what the report is going to say. I want to say that the government has made considerable progress in implementing accrual accounting in many aspects of financial planning and reporting. As a trend, we see that happening in the Government of Canada. The federal budget and the summary financial statements of the Government of Canada are now all prepared on a full accrual basis.

However, increasing the use of accrual accounting and departmental level budgeting and parliamentary appropriations to departments is a complex one. It will require a significant investment in systems changes. So it's not simply a case of saying, well, we've used this system up until now and tomorrow we're going to use another system. The system changes are in fact quite significant, and the transition would have to be very carefully managed. It includes not only systems but also training.

Without letting the cat out of the bag, we understand that accrual offers a lot of benefits, but there are significant challenges. I think the government has already demonstrated that it is moving in the direction of accrual accounting and will do so on a timely basis. But we don't want to jeopardize the ability to maintain services and other issues like that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

But without letting the cat out of the bag, the government in the last number of years has basically adopted a new accounting structure, or a new IT technology, and it cost a lot of money to put it in place. One of the concerns about the adoption of accrual accounting is whether or not the present system could be adapted to meet that criteria, or whether we have to go with a whole new enchilada. Could you give us an indication of where your preliminary investigation has led us to, in what direction you would be heading?

[Charles-Antoine St-Jean]

The implementation of such a basis of accounting would require some modification to the systems. Most of our financial systems here are based on a common vendor platform, SAP and Oracle and so on. So there is a strong basis to do it.

That being said, once you introduce that new basis of accounting, you have to amend your chart of accounts and some of the business processes around it. So we would be able to leverage our current infrastructure, but there will be some investment that would be needed to update, upgrade, and generate those numbers. But we're not starting from scratch.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Knowing that it is quite a daunting challenge, are you personally in favour of the easy, trickle-in approach? Or, as an example, British Columbia, when they were here, said, let's just do it, and they went whole hog. They made a major transformation all at once. They thought, let's get the pain over with. They'd have that initial cost, but it wouldn't be dragging on and on. In other words, it wouldn't be a 10-year process. They could probably do it one, two, three, or four years. What are your thoughts on that?

[Vic Toews]

Sometimes you have to move quickly and almost immediately on certain things, because as you know, for example, when you're changing from a right-hand drive to a left-hand drive, you want to do it all in one day as opposed to two or three separate days. And that needs to be, in a way, understood here. Certain things you will have to do immediately. Other things can be done in a more gradual approach. But I'm confident that the departmental officials, working together with the Auditor General and other relevant departments, will make that determination as to what progress we can make. I'm quite familiar with the recommendations and I'm committed to looking at how we can provide more accountability.

The last point that also has to be remembered is when we talk about some of these systems, as I'm learning, when we're talking about accrual accounting, there are many different mechanisms of accrual accounting. Even if you look at Canadian provinces, if I'm not mistaken, there are different systems. So if one simply is to say, well, we're going to adopt accrual accounting, what does that mean? What is the best mechanism or best system of accrual accounting for any one area? It's not quite as simple as saying we're going from right-hand drive to left-hand drive.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I thank the minister, and I can assure you that we have been exposed to a number of versions of the accrual accounting process. Obviously, it is not up to us to make the decision as to which would be the correct one. Obviously, that falls with our professional people to make that designation, but it's encouraging to have the minister basically state that he's in favour of definitive action, whatever that action may be.

Thank you.

[The Chair, Liberal, Diane Marleau]

Madam Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Madam Chair.

Welcome, Mr. Minister, and other witnesses. It's good to see you again. Although we've had many months to study in depth the allure of accrual accounting, I'll leave those questions to others on the committee.

[Vic Toews, Conservative, Provencher, MB]

Thank you.

[The Chair, Liberal, Diane Marleau]

I thought it was passionate; I don't know about the rest of the committee.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I would like to ask you questions on a couple of different topics. One is on the issue of procurement. I know this is certainly under the auspices of Minister Fortier, but I just want to get your thoughts.

Obviously, with respect to procurement, government best serves the country by getting competitive bids and making sure we're getting good value for our money. But also government procurement is a big source of Canadian jobs and investment, and we've heard a lot of debate around the defence contracts. I don't want to ask you about those contracts, but just in general, do you have any thoughts about the importance of economic development with respect to government procurement?

[Vic Toews]

I do, and I'm not exactly sure how much I can say. That's the problem with briefings. You don't know what's public and what's private anymore.

[Peggy Nash, NDP, Parkdale—High Park, ON]

You can trust us. Just share it all with us.